Gold Sees Biggest Monthly Drop in a Year

Last Friday, the price of gold saw a slight uptick, yet the overall performance of gold throughout November has been notably disappointingIn fact, it recorded the largest monthly decline since September of the previous yearInvestors are now turning their attention to the upcoming employment report from the United States for November, which promises to shed light on the health of the U.Seconomy and have implications for interest rate trends in the months to comeFrom a technical standpoint, the movements in gold prices last week resembled a bearish "flag" patternThis observation calls for vigilance among investors, as there exists the risk that gold prices may soon retest the 100-day moving average.

As of Monday, December 2nd, during the early Asian market hours, spot gold has experienced minor fluctuations, currently trading at $2646.95 per ounceThe fractionally higher gold prices last Friday were influenced by a weakening U.S

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dollar and ongoing geopolitical tensionNevertheless, November still marked a drastic downturn, showcasing the largest monthly decline since September of last yearSpot gold rose by 0.5% to reach $260.26 per ounce on Friday, yet overall, prices are expected to dip more than 2% for the weekA significant drop exceeding 3% occurred last Monday, which couldn't be countered in subsequent trading days, creating a lingering concern regarding further declines in gold prices.

In November, spot gold faced a downturn of 3.4%, representing the largest monthly drop since September 2023. This fall was sparked by a "euphoria" towards the start of November that buoyed the U.Sdollar, ultimately hampering gold's upward trajectory and inciting a sell-offDespite a dip in the dollar index to a two-week low last Friday, it still rose by 1.8% throughout November, driven by expectations of substantial government spending, increased tariffs, and tight border controls

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The current pressure on gold is noteworthy because higher tariffs could potentially stoke inflation, leading the Federal Reserve to adopt a more cautious stance regarding further interest rate cuts.

Market analyst Jim Wyckoff provided insights, stating that the uncertainty surrounding tariffs, which may slow down economic growth, has paradoxically offered support to the gold market from a safe-haven perspectiveAnalysts also share the view that policies aimed at combating illegal immigration could reignite inflationary pressuresAdditionally, stronger-than-expected economic data has raised concerns regarding the Fed's potential slowing of rate cuts as they approach a neutral rateTools such as the CME FedWatch Tool indicate traders currently see a 66% chance of a 25-basis-point rate cut in the Federal Reserve's meeting on December 17-18; however, the likelihood of another cut in January plummets to a mere 17%.

According to Ole Hansen, commodity strategy head at Saxo Bank, ongoing global uncertainties continue to drive demand for gold as a safe-haven asset

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The next crucial economic data from the United States is set to be released on Friday, specifically the November employment reportMarket participants are keenly awaiting this report, which could influence their perceptions of the U.Seconomy's health and play a pivotal role in deciding the trajectory of interest rates in the coming monthsA series of robust economic data releases, particularly the Employment Report from September, has led to apprehensions within the marketMany fear that if the Federal Reserve implements heavy cuts, it could inadvertently trigger a rebound in inflation, negating the progress made over the past two years in price stabilization.

While most investors have welcomed signs of an improving economy, they emphasize cautionShould the non-farm payroll data, scheduled for release on December 6, show continued strength, it could further dampen market expectations around Fed rate cuts and heighten inflationary concerns.

Angelo Kourkafas, a senior investment strategist at Edward Jones, expressed that the non-farm data would provide clearer guidance on future economic trends, especially in light of the current uncertainties regarding Federal Reserve rate decisions.

Earlier in November, Federal Reserve Chair Jerome Powell conveyed that given the robust job market and inflation consistently above the 2% target, the Fed is not in a rush to lower rates

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Sameer Samana, a senior global market strategist at Wells Fargo, also hinted that the Fed is beginning to question how much monetary easing the labor market truly necessitates.

Anthony Saglimbene, chief market strategist at Ameriprise Financial, highlighted that economists participating in a Reuters poll predict an increase of 183,000 non-farm payroll jobs in NovemberShould the report exceed expectations by a wide margin, it may undermine confidence regarding Fed actions in December and dramatically impact the stock market"If the employment report comes in stronger than anticipated, we might see some selling across U.Sequities," he suggested.

This week, along with the non-farm payroll data, various other economic releases are also on the radar, including the U.SISM Manufacturing PMI for November, October JOLTs job openings, and the November ISM Non-Manufacturing PMI, among others

Furthermore, multiple Federal Reserve officials, including Powell, are slated to speak this week, prompting traders to monitor developments closely.

Meanwhile, the ISM Manufacturing PMI data for November will be released on Monday, during which additional speeches from Federal Reserve Governor Waller and New York Fed President Williams are also expectedInvestors will need to stay abreast of geopolitical developments as wellRecent data from KITCO indicates that bearish sentiment from Wall Street analysts has decreased, with the majority of analysts leaning towards a neutral or bullish view on future trendsIn a recent survey, 14 analysts participated, with 6 (43%) expecting gold prices to rise in the coming week, while 7 (50%) anticipated further consolidation in pricesOnly 1 (7%) predicted a decline in gold valuesFrom an online survey of 199 participants, 96 (48%) anticipated a rise in gold prices, 61 (31%) expected a drop, and the remaining 42 (21%) saw a sideways movement in prices.

From a technical standpoint, last week’s movements in gold prices resembled a bearish "flag" pattern, compounding concerns about an impending revisit to the 100-day moving average